President Ma Ying-jeou on the morning of November 30 attended the Economic Daily News 2011 International Economic and Financial Forum. The president stressed that the government will act as soon as possible to formulate measures for responding to the European debt crisis. He also urged the European Union (EU) to quickly come up with concrete and effective methods to achieve economic recovery.
In remarks to the gathering, President Ma commented that the global economy is presently at a critical juncture. On the one hand, the American economy shows signs of stabilizing, and consumer spending recently posted the highest growth rate since the fourth quarter of last year. Meanwhile, the number of people filing for first-time unemployment benefits has fallen to a seven-month low. On the other hand, the European debt problem has gradually spread from Greece to Portugal, Spain, Italy, and Ireland. At the same time, long-term bond yields in France, the EU's second largest economy, have risen sharply. Meanwhile, some 39% of a recent German bond issue was not sold. These events have caused concern in Europe and around world, he said.
Turning to the topic of the soundness of Taiwan's economy, the president stated that over the past three years our budget deficit (including deficits under the central government's regular and special budgets) as a portion of GDP has been declining, as has the issuance of central government debt. Deficit spending has fallen from a peak of 3.5% in 2009 during the financial tsunami to 3% last year. This figure is expected to further decline to 2.5% this year, and to 1.6% next year. Meanwhile, the net amount of debt issued has fallen from NT$410.7 billion in 2010 to NT$342.6 billion this year, a reduction of 16.6%. It is expected that next year this amount will be reduced by another 37%, which shows that the ROC's level of debt remains within reasonable levels.
The president also remarked that the ROC presently has foreign exchange reserves of around US$400 billion. In addition, as of September this year the ROC no longer had any foreign debt. With regard to the private sector, Taiwan banks (including offshore banking units) as of June of this year had an aggregate US$190.2 billion exposure to international claims. Of this, holdings of debt issued by entities from five troubled European nations totaled NT$24.5 billion, which constituted only 0.5% of the total.
The president stated that Taiwan is a shallow-dish economy. Moreover, it is one of Asia's important emerging markets and exhibits a high degree of internationalization. These factors combine to make Taiwan quite vulnerable to global events. Even though Taiwan's economic fundamentals are not bad, economic conditions in Europe give little cause for optimism. Should the EU financial crisis go from bad to worse, the United States and the world as a whole will feel the impact, causing imports to contract. Orders to Taiwan from Europe would decline. Therefore, we still must closely monitor the European debt problem and make all necessary preparations.
President Ma stressed that the Executive Yuan is currently drafting a plan to counter the possible effects of such a crisis and will unveil a set of measures at the earliest possible time in order to put the public and the corporate sector at ease. This will also enable everyone to regain confidence, he said, expressing his belief that the challenge facing us will be overcome. Meanwhile, EU leaders will hold a summit on December 9 and the president urged the EU to exhibit determination and courage in unveiling concrete and effective methods to quickly resolve the disputes associated with European debt and enable Europe to embark on a path to economic recovery.
President Ma recalled that over three years ago the ROC adopted a number of measures in response to the financial tsunami. These included providing full protection for bank deposits, issuing consumption vouchers, and providing vocational training free of charge for furloughed workers. Meanwhile, the nation's Central Bank cut interest rates seven times and the government instituted the so-called "three supports" policy, in which the government supported banks, the banks in turn supported enterprises by providing financing, and enterprises supported workers by keeping them on the payroll. Together, these measures effectively limited the severity of the recession that overtook Taiwan. Meanwhile, the government also mapped out an economic revitalization plan and sought close cooperation between the industrial and academic sectors. In addition, it promoted worldwide recruitment of enterprises to invest in Taiwan and unveiled the New Zheng He Plan (新鄭和計畫) in an effort to boost exports. Besides this, the government introduced medium- and long-term projects such as the "six major emerging industries," the "four emerging smart industries," and the "ten key service industries." All of these measures have yielded significant results, he said, pointing to last year's economic growth rate of 10.72%. The president also noted that Taiwan's unemployment rate has fallen from a high of 6.13% in August 2009 to 4.3% in October of this year. The results are there for everyone to see, he stated.
After concluding his remarks, the president engaged in a discussion with 2010 Nobel economics laureate Peter A. Diamond on economic development, monetary policy, and measures adopted by Taiwan. The president thanked Mr. Diamond for his recognition of the success of the measures instituted by Taiwan to counter the financial tsunami. He also stressed that the government will continue to examine and assess the feasibility of various measures that could be adopted in various circumstances.